November 7, 2016

The Norwegian power industry is rapidly changing as the
market transits from a reliance on fossil fuel to renewable energy projects.
Although energy prices currently are low compared to earlier years, there is
heavy demand from foreign investors wanting to participate in projects located
in Norway. Only this year we have seen several wind deals in the Norwegian
market; Raskiftet (112 MW), Tellenes (200 MW), Fosen (1,000 MW), Hamnefjell
(120 MW), Egersund (110 MW) and Svåheia (25 MW), all with foreign lead
investors; Stadtwerke München, BlackRock, Credit Suisse, Ardian, Luxcara and
Esmann Energy respectively. With Europe's best wind conditions, a
well-functioning marketplace and industrial off-takers, we expect continuing
high deal flow on wind farms in 2016 and 2017.

We also see several small hydro power deals in the market,
both portfolios with a mix of production and projects, and portfolios with
operating assets. We believe that more small hydro projects and portfolio
opportunities will be entering the market over the next years.

So far, there has not been much activity relating to grid
and infrastructure deals in Norway this year.

Legal update

Hydropower

On June 17, 2016, the Norwegian Act on Industrial Licencing
(Nw: Vannfallskonsesjonsloven) was amended by the Norwegian Parliament,
with changes takin effect on July 1, 2016.

The amended legislation allows private parties to establish
a minority ownership in state-owned hydropower companies, regardless of whether
the company is structured as a general partnership or a divided liability
company. By permitting private parties to acquire as much as one third of the
capital and votes in such entities, the law will make it possible for private
parties to agree with other rights holders to receive the company's available
electrical power as dividend equivalent to the party's ownership interest.

The amendment entails no further changes to the Act's rules
on state ownership of hydropower resources. Regardless of its structure, the
company must perform its tasks as if it were state-owned. As such, the company
is obliged to retain full and complete control and ownership of the production
and utilisation of its water resources.

El certificates

In April of this year, the Norwegian government announced
plans to end its green energy subsidy scheme by 2021, and aims to increase
competition by building power lines to other countries.

Since January 1, 2012, Norway and Sweden have had a joint
market for electricity certificates, so called "el-certificates",
aiming to increase electricity output from renewable energy sources, such as
biomass, hydropower and wind power, to a total renewable power output of 28.4
TWh per year by 2020. The joint market will last until the end of 2035.

This month, the Norwegian Water Resources and Energy
Directorate (NVE) published a recommendation stating that several changes
should be made to the scheme, going beyond 2020.

Most notably, NVE recommended
that all el-certificates, whether issued in Norway or in Sweden, should be
tradeable in a Swedish continuation of the scheme. Thus, all el-certificates will
continue to be valid in both countries, irrespective of their national origin.
This means that el-certificates accrued under the current regime will be
realisable also after 2035, securing liquidity in the system.

Interconnector links

On October 18, 2016, the Norwegian Parliament agreed to make
legislative changes to the Norwegian Energy Act (Nw: Energiloven). Pursuant to
the Act, a concession is required for an electricity operator to organise the
trade of electrical energy between Norway and countries outside the Nordics.
Until now, such concessions have only been available to Statnett (the Norwegian
TSO).

Once it takes effect, the amended legislation will enable both private
and foreign operators to own and/or operate the Norwegian side of
interconnector links. Norway already has interconnector links to Denmark and
the Netherlands, and links to Germany and Britain are currently under
construction.

The "NorthConnect" project, a direct submarine power
cable between Norway and Scotland, could be the first project where private
parties get to own and/or operate the Norwegian part of the interconnector
link.

"It is good news that Norwegian authorities is now
sending a clear signal that further development of interconnector capacity is
wanted. We will always be a proponent of physical market integration between
the Nordic power market and our neighbours. We strongly believe that new
interconnectors will be a benefit to the climate, as well as to both Norwegian,
Nordic and European consumers," says the Norwegian Wind Energy
Association (NORWEA).

Depreciation rules for wind farms

On June 19, 2015, the Norwegian Parliament agreed to make
several changes to existing rules on depreciation for wind farms. The amended
legislation entails that most investments in wind farms will be depreciated on
a linear basis over a period of five years. Given that the amended legislation
has a possible competition restricting nature, the Norwegian Parliament decided
it would not give it effect until the rules had been approved as legal state
aid by the ESA Surveillance Authority (ESA). ESA did so on July 6, 2016. The
Norwegian Ministry of Petroleum and Energy (OED) is currently working to ensure
that the amended legislation takes effect as soon as practically possible.

The new rules will apply to operating assets acquired in the
period from June 19, 2015 to the end of fiscal year 2021, provided that no work
was commenced on the relevant project before June 19, 2015.

North Sea countries agree on wind power co-operation in the
North Sea

On June 6, 2016, Norway voluntarily declared that it would
co-operate with other North Sea countries on developing cost-effective offshore
wind power projects in the North Sea. Spatial planning will aim at optimising
the use of limited space in this intensively used sea area, and will include
data sharing, finding common approaches to environmental impacts, and
coordination of permitting procedures. The countries will also co-operate to
develop the electricity grid so that it is able to accommodate large scale
offshore wind energy projects. In future, participating countries will share
information about their individual offshore infrastructure needs, aiming to
identify best practices and ways to harmonise technical rules and standards
across the region.

This is not, however, the most recent inter-state agreement
on renewable energy that Norway has signed; On October 13, 2016, Norway agreed
to allocate 502.5 million euros, about 4.5 billion kroner, to a number of
cooperation programs with Romania in the coming years through the EEA Grants.

Recent opportunities in the market

Several hydropower and wind farm projects are for sale in
the Norwegian market. These include (among others):